Asset Protection Footprint
Most of us have heard the term carbon footprint and have considered its meaning, the long-term effects and possible solutions to the problem. From separating trash to buying hybrid cars, a majority of people have seriously attempted to reduce their carbon footprint. The very definition is a measure of the impact our activities have on the environment as it relates to the amount of greenhouse gases produced in our day-to-day lives, through burning fossil fuels for electricity, heating, fuel consumption, water usage, diet and a host of other factors. A carbon footprint is the measure of all greenhouse gases we produce individually.
Taking a page out of the carbon footprint measurement, we can extrapolate a new way of looking at your wealth by determining your asset protection footprint. Having a large amount of wealth in most instances increases your asset protection footprint. For this discussion, your asset protection footprint will measure the liability exposure of your family name in the world, the amount of property you own, the amount of counties, states and countries you cross, not to mention, how exposed your assets (liquid assets – gold – currency – stocks – bonds) are to creditors.
Exposure to liability is pervasive due in part to the new media tools available. Do you have a Facebook account or any social media account? Creditors and the IRS find it very useful. Is your family name on any of your property? Do you have large amounts of cash deposits in your family name? Is your brokerage account in your family name? Are you in the media?
Looking at the real estate run up prior to 2008, many clients had and still have properties in multiple states and multiple jurisdictions. Barring the potential exposure in those states for potential creditor attack, the energy output to gain and manage one net dollar is more challenging than owning the same amount of properties in your local community. While gains were better in so-called hot markets, more energy was needed making potential creditor attack inevitable.
As with a carbon footprint, your wealth accumulation goals should include a systematic approach to reducing your asset protection footprint.
In this case, the risk is the amount of exposure each asset may have to a potential attack from creditors near and far. It seems that no person or group was left out of the 2008 financial crisis. Prior to the crisis, many people I spoke with felt that they did not have a need for asset protection.
Look at your current financial footprint – here are some places for consideration.
– Real estate held in your name
– Equity in your personal residence
– IRAs and pensions
– Stock portfolios
– Inheritance
– Cash value life insurance
– S-corps, C-corps and LLCs
What if you were to get an inheritance today? How would you receiving the assets? Would you receive the assets in your own name?
– If so, did you go through a short sale recently?
– Do you have any current judgments?
– Do you owe the IRS?
This brings us full circle; getting money outright increases your asset protection footprint and therefore increases your exposure to potential creditor attack.
Solutions for today do not need to be overly complicated and in many cases lower valuations make for good planning. You can lower your asset protection footprint by using proper court tested asset protection structures. In most instances, the solution will be a combination of legal roadblocks to keep the bad guys away from your hard earned money. By preparing now you can receive inheritances, you can enjoy the wealth, and you can send it along to the next generation, all the while reducing – your asset protection footprint. Now, if we could only figure out how to reduce our carbon footprint, maybe the price of gas would eventually go down.
